I think it's very weird, but not sexual. Sound to me, too, SL, that she is kind of obsessed with cleanliness.
She needs to put a little step stool in front of the toilet, and get a container of clorox wipes and allow that child to use the bathroom in a normal way.
She may not be the only one doing it (I hear of parents wiping their 11 year olds behinds), but it seems like an unhealthy practice. Is she obsessed with germs and cleanliness?